Investigating the Nexus Between Foreign Direct Investment and Sustainable Energy Transition: The Case of Vietnam

Bui Huy Nhuong, Luong Thi Thu Hang, Do Thi Thu Thuy, Phung Thanh Quang and Khuc The Anh
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Bui Huy Nhuong: National Economics University, Hanoi, Vietnam
Luong Thi Thu Hang: ��School of Banking and Finance, National Economics University, Hanoi, Vietnam
Do Thi Thu Thuy: ��School of Banking and Finance, National Economics University, Hanoi, Vietnam
Phung Thanh Quang: ��School of Banking and Finance, National Economics University, Hanoi, Vietnam
Khuc The Anh: ��School of Banking and Finance, National Economics University, Hanoi, Vietnam

Journal of Environmental Assessment Policy and Management (JEAPM), 2024, vol. 26, issue 01, 1-21

Abstract: This study investigates how foreign direct investment (FDI) has impacted Vietnam’s sustainable energy transition from 1988 to 2020, utilising the autoregressive distributed lags (ARDL) technique for analysis. In the short term, a 1% increase in FDI is linked to a minor 0.015% reduction in the quality of energy transformation, indicating initial adverse environmental effects. However, in the long term, a notable improvement of 0.042% in energy transformation quality suggests that FDI-driven initiatives positively contribute to sustainable energy practices. Simultaneously, other factors such as the Consumer Price Index (CPI) demonstrate detrimental impacts both in the short term (0.039% decrease) and the long term (0.429% decrease), posing challenges to environmentally friendly projects. Conversely, the Green Economic Growth Index displays significant positive effects in both the short term (0.397% increase) and the long term (0.184% increase), emphasising the importance of fostering green economic growth. To accelerate the progress of sustainable energy transition, Vietnam is encouraged to implement policies encompassing the digitization of green initiatives, the introduction of green financing mechanisms, and the provision of supportive incentives for environmentally-conscious investors.

Keywords: Sustainable environment; foreign direct investment; energy transition; Vietnam (search for similar items in EconPapers)
JEL-codes: C23 F21 Q35 Q40 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S1464333223500230

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